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To Buy Penny Stocks


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To Buy Penny Stocks


We do not trade penny stocks trading over the counter mainly because of the lack of liquidity along with the lack of regulations in the OTC market. They are far more susceptible to manipulation which makes them dangerous to trade.


Listed penny stocks, or stocks trading on an exchange like the NYSE or NASDAQ is where we focus our attention. They have the ability to make huge moves intraday and are cheap enough to put on large positions.


These stocks can come out with news overnight that result in a 50% drop to the downside or a 100% squeeze to the upside. Anyone investing or day trading in these types of securities has to be prepared for the possibility of a total loss.


Many people would consider becoming a millionaire by day trading penny stocks to be the ultimate rags to riches story. By trading the cheapest stocks on the market, you can invest small amounts of money and see huge returns.


The allure of quick returns draws the crowds into the penny stock market, where many end up losing their shirts. At the end of the day, only 10% of active traders in the market will actually be profitable.


However, if you think you have the skills to day trade penny stocks then you need to make sure you educate yourself on how to trade them along with money management techniques to avoid losing all your hard-earned capital.


This information is designed to provide you, the beginning investor, with general information about penny stocks and the markets in which they are traded. Because there is so much fraud involving penny stocks, this information serves mostly to warn potential investors against becoming involved with penny stocks. However, you should be aware that many small, deserving, completely legitimate companies issue stock that trades for pennies a share in the over-the-counter market. The trick is to be able to spot the potential fraud. We hope this information will help you do just that.


Penny stocks are not traded on a stock exchange but are traded in the over-the-counter (OTC) market. Part of the OTC market is the NASDAQ National Market (NNM) of the NASDAQ National (Association of Securities Dealers Automated Quotation) System, which does not include any penny stocks.


There are also non-NNM NASDAQ securities, including some penny stocks. The NASDAQ system has listing standards that change from time to time and, depending on the standards, there may be more or fewer penny stocks on NASDAQ. If you purchase a low-priced security that is listed on NASDAQ, it will meet certain minimum standards. In addition, many NASDAQ prices are quoted regularly in newspapers, allowing you to follow the price of your security instead of forcing you to rely on your broker for all price information.


In most securities transactions, your broker-dealer acts as your agent, arranging a transaction directly between you and a third party. In compensation for arranging that trade, you pay your broker-dealer a commission. In some instances, the broker-dealer has the security you seek to purchase in inventory, or wants the security you wish to sell. The broker-dealer may trade with you on its own behalf, as a principal in the transaction. When the broker-dealer acts as a principal, and not as an agent, the trade confirmation should say that on its face. The broker-dealer is not paid a commission in principal trades, but makes its money on the spread, and by buying and selling at advantageous times, the same as any other investor. A sizeable portion of penny stock trades are principal transactions, and an investor should be alert to the potential conflicts of such transactions.


Penny stocks do not each have a single price at which they are bought and sold, but a number of different prices. The first difference is between the bid price and the ask price. The bid price is how much someone is willing to pay for the security, or the price at which you could sell your shares. The ask price is how much someone will sell their securities fo




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